Durbin and Debit Savings
Durbin and Debit Savings – As you may recall, from an earlier article written on this subject. Durbin capped the amount that “regulated” banks could charge for their issued debit cards. Now, here’s where it tends to get a little tricky… who and what are “regulated” banks? Well, the guideline is, I believe, $10 billion is assets. Banks that don’t meet the asset criteria are “exempt” from the caps, therefore protection of one of their revenue streams. Do you have a debit card? Do you know the asset size of your issuing bank? Not that it matters to you as a card holder but, to a merchant, it could make a big difference in fees. Game Slot Online.
Now the articles I write are primarily meant for the beneficial education of merchants. So, with that in mind, let’s take a look at some examples of fees. Typically, if a customer is spending money with you they will likely only use their debit card for smaller (and “smaller” means different things to different people) transactions. So, for sake of this discussion, let’s say the transaction size is $100 and the customer hands over their debit card. Let’s compare some cost-to-the-merchant examples:
Let’s assume that you are on a Tiered Pricing structure and are getting charged $1.23% + $.10 for swiped debit cards. Your fees on the $100 transaction would be $1.33 and under this form of pricing, you’re not getting the benefit of pinned or Durbin pricing. So, in effect, under this form of pricing, your processor is keeping all that extra profit for themselves. Game Slot Online.
Interchange Plus Pricing
If you’ve read any of my articles in the past. You know that I’m a strong proponent of total transparency in pricing which is what Interchange Plus Pricing offers. Let’s say that you’re fortunate enough to be priced at Cost Plus .25% + $.10 and utilizing those numbers, let’s look at some numbers. So, a customer hands you their debit card (and certainly, remember here you don’t know if it is issued by a “regulated” or “exempt” bank). First let’s look at your cost if it’s an exempt card.
Taking the.80% + $.15 PLUS your .25% + $.10, you are at 1.05% + $.25 or a total of $1.30 in fees on the $100 transaction. No great savings here when compared to the Tiered Pricing description shown above but, now, what if it’s a “regulated” card. Then, under this Cost Plus pricing, the cap is .05% + $.21 and then you tack on your PLUS of .25% + $.10 and you have a rate of .30% + $.31 resulting in total fees of $.61… now we’re talking.
Pinned Debit Comparisons
Now, let’s say that you are hooked up to accept pinned debit transactions either through an external/internal pinpad. Now, typically, your processor will be charging you a Monthly fee of maybe $5.00 to accept pinned debit transactions. Also a per transaction fee of maybe $.15. So, when a customer hands you their card. You have them enter their pin number and now your costs are as follows:
Your fees on the $100 transaction would be $1.10. On the other hand. The regulated rate is .05% + $.21 + $.15 (for the processor). So the total fees on this $100 transaction would be $.41. Of course, this would represent a significant savings for you.
Now with all this said, and with all these numbers swirling around in your head. What is most beneficial to you as a merchant? In my opinion, when you look at the numbers, it really doesn’t matter if you are on a Tiered or Interchange Plus pricing model. Since you’ll never know at the point of sale if the card is issued from a regulated or exempt bank. The resulting savings that go along with it. Hopefully, this has helped to de-mystify some of the confusion I’ve been hearing about regarding this Durbin Amendment. Thanks for reading. Game Slot Online.